Why do Brazilians Love to Pay with Installments?

In this class: vocabulary regarding finance, Brazilian and Latin American economics.

Before the article, watch this video:

In this video, teacher Augusto presents the essential vocabulary for the article “Why do Brazilians Love to Pay in Installments?”

 

Now, read the article:

Brazilians love to buy in installments. In 2017, as ecommerce in Brazil generated more than USD14.4 billion, 60% of the purchases were made with credit cards. In more than half of these cases, choosing credit card as the payment method was something directly linked to the possibility to pay in installments, as 54% of the Brazilians who shopped online with credit cards in 2017 chose to split the total value into smaller amounts to be paid throughout the months.

But why is the habit of paying in installments is so popular in Brazil, while in the rest of the world consumers are used to paying all at once? How did it all start?

Those were recurring questions here at EBANX, so we’ve decided to do some exploring and figure it all out.

During the second edition of the EBANX Summit, an event that brought together merchant from all around the globe to talk about Latin America, we’ve brought our specialists from the Product Team, Sarah Nicolau and Rafael Lazzarin to discuss the topic through a workshop.

When did Brazilians start to use installments?

If you believed that paying in installments was something that started along with the usage of credit cards, you couldn’t be more wrong. The habit of splitting up the payment of purchases in Brazil began in the 50’s with the popularization of the “crediários”. As back then many people didn’t have enough money to pay for high-ticket items, the solution encountered by Brazilian retailers was creating this new method which consisted of the consumer registering at the store, buying items and paying for them through the next few months.

This strategy was a hit for both consumers and retailers. Consumers gained more purchasing power and didn’t have to worry about interest; retailers ensured a new way of motivating customers to return to their stores and shop more often.

Amongst the unstable economy of that time and uncontrollable inflation, that was the best way retailers found to make their business flourish despite it all. During the workshop, Sarah and Rafael stated that the success of that measure back then made installments become part of the Brazilian population’s DNA“.

Nowadays, there are still Brazilian shops that offer old-school crediário or in more modern ways, such as offering customers the option to pay with private label credit cards.

Installments Landscape 2018

Before we tell you this story, you need to put yourself in the shoes of a Brazilian e-shopper with an average monthly income of USD 550.

Have in mind that this monthly amount needs to cover all your basic expenses, considering that most Brazilians don’t have the habit to save money regularly. Say one fine day your smartphone breaks; buying another one and pay for it all at once could compromise half of your income. So, what would be a viable alternative? Paying in installments, of course.

This is the reality of the majority of Brazilians and it is not hard to imagine why such a big part of the population finds in installments a way to increase their purchasing power.

Because of that, installments is not something exclusive to the purchase of high-ticket items; with such a low minimum wage in comparison to the price of products, many Brazilians use installments even for their daily expenses.

Installments in Latin America

This might come as a surprise, but not only Brazilians use installments, it’s a reality in countries of entire Latin America, including Mexico and Argentina. The reality of these countries is very similar to Brazil’s, even with the accelerated growth of the upper-middle class in the region.

Latin Americans face the same challenges that Brazilians do to increase their purchasing power, particularly when it comes to high-ticket items. The solution? You’ve guessed it right: installments.

That’s why one of the key points to having a successful expansion strategy is offering local credit cards as the form of payment with the possibility of installments. This is the best way to compete in a healthy way with the local brands from the market you wish to enter.

The difference in real life: Success cases

To illustrate how installments can be a transforming factor for the success of an international business in Latin America, we’ve brought two examples of websites that process payments with EBANX and that have started accepting payments with installments in Brazil.

Retail Success Case

Before the implementation of local credit card installments, this retailer used the boleto bancário as the main alternative payment method. Only three months after implementing installments in their website, the brand had a pleasant surprised: sales more than doubled.

And this was not the only positive behavior change, the Average Order Value (AOV)  also had a significative impact. With the previous payment methods, in which the total amount needed to be paid all at once, the store had an AOV of around USD 50. Now, with the installments option, this number jumped to USD 85.

Travel Success Case

Traveling is one of the greatest passions of Brazilians, yet the AOV of tourism services tends to be very high, thus, offering payments in installments is vital for the success of a company from the travel sector not only in Brazil but in entire Latin America.

Particularly to Brazilians, it is very common for them to go back from a trip and keep paying for it through the credit card bills of the following months.

The graphic below illustrates this reality in Brazil; 43% of the users opted out for paying for their travel bookings in 6 to 12 monthly installments, even with interest charges in this case.

Summing up, the reason why Brazilians and Latin Americans use installments so much boils down to one thing: access. Access to higher-ticket products, to a broader quantity of items and to a better purchasing power. Without this solution, the economic landscape of these emergent economies would dramatically reduce the purchase options of this population.

This is also the reason why you need to think of installments as an essential path for a successful expansion to Latin America. Guaranteeing that all connected Latin Americans have access to your products and conditions to buy them is the first step to success.

Practice Your Writing

Do you usually pay your purchases in installments? In which circunstances do you prefer to pay in cash and in which ones do you prefer to pay in installments?

49 respostas para “Why do Brazilians Love to Pay with Installments?”

  1. No, I don’t like to pay with installments because I don’t like the idea of having debts, or that the money that I’m going to gain in the nexts months is already gone.
    I only pay with installments if it is a really big value, and always with the less installments possible.

    Responda

    1. I usually use my credit card to buy in installments, for me is more convenient , because I can have more access to buy other things, however I always keep my budget and never split up the payment of the total amount of the credit card.
      I Rarely use to pay in cash, in my opinion only things of high value in Brazil get good discount so I consider to negotiate.

      Responda

  2. I totally agree, Liane!

    Just two quick corrections:

    Ganhar dinheiro = earn money (use “earn” instead of “gain” in this case).
    Grande valor / Valor alto (financeiro) = big / large amount (in this case use “amount” instead of “value”).

    Keep commenting 🙂

    Responda

  3. If I have or want to buy a high-ticket item and have time, I can save the money for it and pay all at once. But if it’s something urgent and I have to pay in installments, my choice is to take higher installments and don’t extend the debt for many months.

    Responda

  4. I have relatives who love to pay with installments, but I prefer to pay at once in credit card or in cash, negotiating some discount and get a better condition. With these savings I can invest in other item or keep the money to use in a future opportunity.

    Responda

  5. I pay my purchases in installments once in a blue moon because I prefer to pay with cash as possible I can, even though, I prefer to pay in installments when I want to buy high-ticket items, for instance, gadgets or travel pack.

    Responda

  6. Depends on. If I have money enouth to pay it and will not need to by another thing I prefer to pay in stallments and keep the money and chose kind investment. but it works only for big amonts.

    Responda

    1. Sure, Lucia. It really depends.
      Some stores charge the same price, regardless of whether you are paying cash or in instalments. In this case, it makes sense to choose instalments.

      But if they give a discount for cash payment, then it is better to pay cash – unless of course if you are a great investor and can make your money return more than the discount they offer!

      Responda

  7. I believe that the advantage to pay with credit card is possibility the be all the payments in one bill so we have higher control, even gain points to change in fly companies for example. When I was Working I used to buy with credit card and when it was high-ticket items I used split in small quantities. Nowadays as I am not working I just buy with debit card .

    Responda

    1. Sure, Luis! Credit cards offer some advantages as the ones you’ve mentioned. We just have to be careful with the expenses, and to pay all the bills, otherwise the debt escalates outrageously, right?

      Responda

  8. The advantage to pay in credit card take us to pay with installments even for the lower- tickets products. In my case, I do shopping paying with installments but never split up the total bill.

    Responda

  9. I pay in installments when I want to buy high-ticket items, like a car for example, besides that I prefer saving money and purchases all at once.

    Responda

  10. I use to do this installment method when I need to buy something that costs more than 20% of my monthly income; on the contrary, I like to save and pay for my purchases in cash.

    Responda

  11. I use to do this installment method when I need to buy something that costs more than 20% of my monthly income; on the contrary, I like to save and pay for my purchases in cash.

    Responda

  12. I prefer to save the money and pay in cash. Sometimes it gets a little frustrating when the sellers want to sell by credit card saying that the price in instalments is the same. But I keep trying to came to the best agreement.

    Responda

  13. I´m not used to pay any purchases in installments. I prefer to ask for a discount to the salesman, so I would try that first.
    If I don´t get any discount then I buy the product or service in installments paying attention on the interest of the operation, of course.

    Responda

  14. The idea of paying in installment is the same as cash flow. If you have small parcels to pay, more you can spend or less you need money to pay your obligations.
    This is a good idea, because for example – you can buy more than one thing. If don’t split up the payment, you can buy only one thing or nothing. I usually pay in installments high-tickets items. Low amounts I usually pay on cash.

    Responda

  15. I prefer pay in cash with some discount, but unfortunately it is possible when you go in a store phisically.
    I only pay in installments if there is no discount paying in cash because you can invest the money leftover.
    I have a question: Is there no translation to english language for “boleto bancário”?
    Thank you!

    Responda

    1. Hi Silvia, that’s a good question!

      There is no direct translation for “boleto bancário”. It is a very “Brazilian” way of payment.
      In English, we have a word called “Standing Orders”, but it is more similar to a “carnê”.

      For other things, you would simply call it “bill”, for example:
      – Electricity bill
      – Phone bill

      Responda

  16. Hello,

    Yes, I usually pay my purchases in instalments. Specially when the item is above 500 reals I prefer to pay in instalments, for example three times.
    Ultimately, I have used my credit card regularly, because it’s more convenient for me, but I plan the majority purchases.

    Responda

  17. When purchasing something, I try to find the best solution for the budget I have. When there’s no discount to pay on cash, I will always pay in installment, so I can keep my money invested.

    Responda

  18. Yes, I do. When I buy a cellphone, a lot of clothes and gifts for friends and family, I use my credit card and make payments in installments.

    I just pay in cash when a seller or retailer don’t accept credit cards ir offer discounts! 🙂

    Responda

    1. That’s a good point, Anderson.

      A lot of retailers don’t offer discounts when you pay in cash, so financially it makes more sense to pay in installments in these situations.

      Responda

  19. It depends…. if the store gives me a “discount “ to pay in cash, I’ll pay in cash… otherwise I will split the amount the maximum that I can because I can invest the whole amount in other thing that give me a “cash back”
    For exemplo… if I buy a product of R$1000,00 and I choose split that amount (12x) and add the rest in a savings account… on the end of the installment I’ll pay around 4x the “insurance “ of the credit car…(in my case R$3,5 a month). Besides to get more options to buy more thing into the month….
    But, we are in 2020 now… with new economic rules…. it is very important check the options up before to make a plan…. if we know using a credit car, we can do cool things!

    Responda

  20. I´d prefer to pay in cash my purchases, I always try to negotiate some discount, but nowadays it is a bit difficult.
    At this time I only purchase necessity items and it is rarely buy any item in cash, I am paying every purchase using the credit card in installments
    So, summing up I am a good example that the article research is totally correct, if I want to have access to good items I have to purchase in installments.

    Responda

  21. Hello! Here by home we were used to paying in installments. Not just for high ticket items, but for example, clothes. Sometimes the purchase is big and It becomes more interesting to split up the total value in small amounts, but not for so long time, 3 or 4 months was the maximum. Our purchase power has changed after we came to Portugal, we até still adapting to everything, and we already understood this opposite tendence to pay all at once here.

    Responda

    1. Hello, Anderson!
      Thanks for your comment.
      Yes, when our purchase power changes, we have to adapt our purchase behaviour, right? And I think in Portugal, people are not as used to paying in instalments as in Brazil, right?

      PS:
      – it is more appropriate to say: In my family we were used to paying…
      – we are still adapting
      – this opposite tendency

      Responda

  22. Hi Ho, thanks for the corrections! And yes, here in Portugal it is not so common to pay in installments as it is in Brazil. But as was explained in the text, there’s the option of registering at some stores, so you can pay in installments. I lived this situation when I bought my new bed here. I wasn’t registered at the store yet, so I asked my sister in law, who was already registered, to buy it for me in his name and this made possible to split up the total value.

    Responda

    1. Hello Anderson,
      Great, thanks for sharing your experience!

      PS:
      – but as it was explained
      – in her name (because you are talking about your sister in law, right?)
      – and this made it possible

      Responda

  23. Hi! Yes, sometimes I pay in installments when i want to buy something high ticket. But i don´t like to pay in many installments, two or three is enough. I prefer to pay in cash grocery shopping or restaurants, usually i don´t like to pay in credit card food.

    Responda

    1. Hello, Natália,

      Thanks for your comment. It’s interesting to learn about your payment behavior!!

      PS:
      – I prefer to pay in cash for grocery or restaurants
      – I don’t like to pay in credit card for food / OR I don’t like to pay for food in credit card

      Responda

  24. Nowadays, i prefer to pay my purchase using credit card. Not only to buy high ticket such as low ticket items. Because the bank offer any advantages for it, like a cashback and rewards program. I think that is necessary analises what is the best benefit for the consumer, to pay in credit card or money. Of course, i prefer to pay with the less installments possible.

    Responda

  25. Currently I prefer to pay cash. Because in the past I acquired a lot of debts with my credit card due to purchases in installments, and now I learned .

    Responda

  26. Hello,

    I usually pay my high-tickets items purchases in installments and the reason is simple. If I paid it in cash, I will not have money to pay my regular bills. 🙁

    Responda

  27. Yes, I like to pay in installments when the purchase has a higher value. But if I have the opportunity to negotiate a lower price, I can pay in PIX (we don’t use cash anymore) or in a bullet payment.

    Responda

  28. I don’t like debts, I prefer to save first and buy after, paying in cash. But when I don’t have a discount paying in cash, I split up the payment in max installments as possible without fees and invest the money.

    Responda

  29. Splitting up the payments is a successful policy of the Asian new e-commerce. And they use a different strategy, splitting up low tickets. Many people spend more than have without realizing it.
    Part of the strategy is to use free shipping and low-tickets stuff.
    I prefer to pay in installments high tickets there is no discount for cash payment

    Responda

    1. Exactly, Ana! Some people really do that!

      Just some minor corrections:
      – low-ticket items
      -spend more than they have
      – I prefer to pay high-ticket items in installments when there is no discount for payment in cash.

      Responda

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